Parcel Rate Outlook 2021



The 2021 General Rate Increases are headlined by familiar 4.9% rate hikes, but the true cost of changes to the parcel carriers’ complex pricing structures can have a much different impact on your transportation budget. Taking a deeper look below the surface-level GRI announcement can help you:

Transportation Insight’s small parcel transportation experts detail changes coming in 2021 to support your ability to control cost and delight customers.


  • UPS rate changes effective Dec. 27, 2020:
    • UPS Ground, Air and International Services rates increase by an average 4.9%
    • Ground Minimum rate increases 6.4% from 2020
    • Lightweight Ground (1 to 5 pounds) packages increase 6.5%
    • Most surcharges increased more than 4.9% contributing to a higher overall rate increase.
    • Additional Handling Charge will apply to packages over 105 inches (length + girth).
  • UPS rate changes effective April 11, 2021:
    • UPS changes the Additional Handling Surcharge and the Large Package Surcharge to differ by zone (non-hundredweight)
  • UPS rate change effective July 11, 2021:
    • UPS changes the Additional Handling Surcharge and the Large Package Surcharge to differ by zone (hundredweight).
  • FedEx rate changes effective Jan. 4, 2021:
    • FedEx Express, FedEx Ground and FedEx Home Delivery rates increase by an average 4.9%.
    • FedEx Freight rates increase an average of 5.9%.
    • Ground Minimum rate (zone 2, 1 pound) increases 6.4% – the largest increase since 2014.
    • U.S. Import and Export services increase 4.9%.
    • Most surcharges increased more than 4.9% contributing to a higher overall rate increase.
    • Additional Handling Charge will apply to packages over 105 inches (length + girth).
    • New Charges:
      • Late Payment Fee of 6% – June 2021

USPS rate changes effective Jan. 24, 2021:

  • Letters additional ounces, metered letters, and domestic postcards all increase.
  • Forever Stamp unchanged at 55 cents.
  • Priority Mail Commercial Base increases 3.4%.
  • First Class Packages:
    • Retail increases 4.8%. Commercial increases 6.5%.
  • Parcel Select:
    • Commercial Lightweight increases 18-30% depending on entry point.
    • Ground increases 0.3%.
  • New Surcharge for Priority Mail, Priority Express, Parcel Return, Retail Ground and First-Class Package services: $100 assessed on packages that exceed the maximum size limit.


Consumer buying habits are sending more residential deliveries into parcel networks than ever before. The pace of e-commerce growth will only continue, crowding more last-mile deliveries into all transportation networks and increasing costs for shippers in the process.

As parcel carriers adapt to these historic volume shifts, they’re instituting new surcharges, adding pricing complexity and targeting rate increases at the hard-to-handle shipments driving cost and service delays within their networks.

The average rate increase for UPS and FedEx may be the same 4.9%, but surcharges and new fees are outside that average. They can have a significant impact.

Unmonitored and unchecked, these changes could have a drastic effect on how you manage your budget in 2021. You may not be able to keep parcel carriers from imposing unexpected peak season cost changes, but you can prepare to manage surcharges.



Applying larger increases on lightweight packages is an abrupt change for FedEx. Two factors likely affect the decision:

  • Competition from Priority Mail: Last year (before COVID-19), FedEx and UPS were both concerned with competition from Priority Mail. Lightweight Priority Mail rates are significantly lower than UPS and FedEx Ground rates, especially to residential addresses. Heading into 2021 with the parcel industry at capacity, there is less concern on competitiveness and more emphasis on profitability.
  • Profitability: Lightweight packages are typically less profitable for small package carriers than heavier weight packages. Carriers are likely to continue to increase lightweight packages at higher levels as long as there are capacity constraints.


While the UPS 2021 General Rate Increase for Ground, Air and International Service mirrors the average 4.9% increase applied the past five years, this year’s rate changes effects lightweight packages more than heavy weights.


UPS announced its 2021 General Rate Increase nearly a month after FedEx and as expected it mirrored the average 4.9% increase on Ground. Although the average increase is the same as last year, the cost impact on lightweight 1-5 pound packages is much sharper at 6.5%. With this increase, UPS is responding to the e-commerce-driven and pandemic-accelerated volume boom for lightweight package shipments.

The rate increase for lightweight, 1-5 pound packages is much sharper for 2021 than last year. Increases on most other lightweights is smaller than 2020.


The minimum rate increase for Zone 2, one pound is 6.4%. Most contracts are for dollar-amount discounts, so most shippers will experience the full 6.4% increase on volume impacted by the minimum.

Cost impact of a Zone 2, one pound residential ground package billed at the minimum charge.


UPS SurePost rates increase on average 6.7%, however, the impact of the increase varies based on weight range. Again, rate increases are higher on lightweight parcel than those for heavier shipments.

  • Parcels weighing 1-5 pounds increase 7.6%
  • Parcels weighing 6-10 pounds increase 5.8%

Keep in mind a 24-cent increase for SurePost was applied in October 2020 as a result of the USPS peak season surcharge.


UPS rates for deferred services saw the biggest increase, while premium services will experience a lower impact. Because capacity is tight, UPS appears to be trying to increase the revenue from deferred services that normally utilize the same aircraft for transport. This aims to encourage less trade down from premium services to deferred services.

UPS increases to deferred services are much higher than increases to premium services.


Beginning Dec. 27, 2020, UPS applies a dimensional change for additional handling charges. Packages that measure greater than 105 inches in length + girth (2 x height + 2 x width) will be assessed a $16 fee.


UPS applied significant increases to accessorials and surcharges, most of which are above the 4.9% general rate increase.

Declared value increased 9.5% ($3.15 to $3.45 from $100 to $300 and $1.05 to $1.15 per $100 in excess of $300).

A sampling of increases in surcharges and accessorials reflect increases across UPS “Value-Added Services.”


The FedEx 2021 General Rate Increase affects Ground lightweight packages more than heavier packages. With the combination of lightweight increases, minimum rate increases and surcharges like Residential Surcharge and DAS, e-Commerce shippers will likely face a major rate increase, especially compared to last year’s increase.

Keep in mind, outside the average rate increase announcements, many shippers will experience an increase in cost of 6-8%, sometimes higher – especially if new charge are implemented.


This is the 14th consecutive year of announced increases of 4.9% or more for FedEx Ground (and UPS). Although the announced increase is the same as last year, the actual distribution on the rate increase by weight is much different than the past few years.

  • FedEx increased lightweight packages at much higher rates than they did last year.
  • Packages from 1 to 5 pounds increased an average 6.6%.
  • Heavier weight packages increased at a slightly lower level than 2020.
Cost of ground service for lighter packages increases more sharply in 2021 than in years past, when heavy package cost climbed more.


The Ground Minimum rate (zone 2, 1 pound) increase of 6.4% is the highest increase since 2014. Last year’s minimum increased 4.8%. Most contracts only provide discounts after the minimum is met, so it is critical to understand the impact of the rate increase after minimum contract levels are applied. In many cases, the minimum could affect more than 50% of a shipper’s volume.

Cost impact of a Zone 2, one pound residential ground package billed at the minimum charge.


A service designed for parcels under 10 pounds, SmartPost rate increases will affect1-5 pound packages the most (6.6% increase). SmartPost DAS increases 20.5% from $1.95 to $2.35 and DAS EXT increases 20.4% from $2.45 to $2.49.

Rate increases for SmartPost were especially impactful in the lightweight parcels.


Late Payment Fee of 6%: Beginning in June 2021, FedEx will implement a Late Payment Fee on shippers past the payment due date of their contract. UPS has charged a Late Payment Fee since 2004. It is critical to make sure your payment is made within your contract terms.

An error is very costly. Transportation Insight works with clients to audit and ensure payments are accurate and timely.

Additional Handling Charges on Larger Packages: If your packages measures over 105 inches in length and girth combined, you will be charged an Additional Handling Fee of $16. This fee targets packages that barely miss the Oversize criteria of 130 inches (L and W combined). It targets packages that take up a lot of space on conveyor belts, but do not get charged high dimensional weight.


FedEx increased accessorial rates and surcharges at some of the highest levels in the past few years. Most major surcharges increased at higher levels than the 4.9% announcement. Third Party Billing Service increased from 2.5% to 4.5%. This is an 80% increase. Extended DAS charges increased 9.3% and the Home Delivery Residential Surcharge increased 8.3%.

Declared value increased 9.5% ($3.15 to $3.45 from $100 to $300 and $1.05 to $1.15 per $100 in excess of $300).


More ZIP codes than ever before will be eligible for Delivery Area Surcharges for both UPS and FedEx. Both carriers adjust the applicable ZIP codes every year, but the past two years have reflected significant changes. In 2021, these charges will apply to almost 38% of the United States.

The increase for UPS DAS areas will apply to almost 12 million more people, while the FedEx changes will affect about 11 million more people. Ultimately, that means you are facing an additional surcharge for more of your customers.

This is a difficult adjustment to calculate on your own, but when that much of a customer-base is affect by new surcharges, deep analysis is required to determine how these changes will affect your budget in 2021.


UPS added ZIP codes – and about 12 million more people – to service areas susceptible to DAS.

FedEx 2-YEAR IMPACT 2020 DAS – 2021 DAS

FedEx changes to DAS affects about 11 million more people.


The U.S. Postal Service filed notice with the Postal Regulatory Commission of price changes to take effect Jan. 24, 2021. Proposed prices – which have been approved by the Postal Service Board of Governors but still require PRC review – would apply a 1.8% increase for First-Class Mail and a 1.5% increase for all other categories.

  • Letters additional ounce(s): increase from 15 cents to 20 cents.
  • Letters (metered 1 oz): increase from 50 cents to 51 cents.
  • Domestic postcards: increase from 35 cents to 36 cents.
  • Letters (1 oz.) and First-Class Mail Forever Stamp remain unchanged at 55 cents.
  • Single-piece 1-ounce flat prices remain unchanged at $1.

The Postal Service has some of the lowest letter-mail postage rates in the industrialized world. Unlike some other shippers, the Postal Service does not add surcharges for fuel, residential delivery or regular Saturday delivery. However, for the first time ever USPS did implement holiday peak season surcharges in 2020. Applied to domestic commercial delivery from Oct. 18 until Dec. 27, these charges ranged from 24 cents a parcel up to $1.50.

And effective mid-January, USPS will add a new $100 surcharge on all Priority Mail, Priority Express, Parcel Return, Retail Ground and First-Class Package services when packages exceed the maximum size limit (combined length and girth is greater than 130 inches).


Priority Mail will increase 3.4% on average with Commercial Base rates (online postage) starting at $7.16, up from $7.02.

  • Priority Mail weighing 0.5 pounds to 5 pounds increases an average 2.8%.
  • Priority Mail weighing 6-10 pounds increase on average 4.1%.
Priority Mail Commercial Plus rate increases for 2021.


First Class Package Service (parcels weighing 15.999 ounces or less) will increase an average of 6.5% in 2021.

Commercial Base (online postage) increases 6.5%, with rates starting at $3.01 (previously at $2.74).

  • Weight 1-5 ounces increases 9.2%.
  • Weight 6-13 ounces increases 4.9%.
  • Weight 14-16 ounces increases 3.9%.
Rate increases are more impactful for lighter First-Class parcels.

Retail Base increases 4.8%.

  • Weight 1-5 ounces increases 5.7%.
  • Weight 6-13 ounces increases 4%.
Effect of the 2021 rate increase largely diminishes as parcel weight increases.


Parcel Select Commercial Lightweight increases 18-30% depending on where these parcels weighing less than 1 pound enter the network.

Parcel Select Ground increases 0.3% on average, with minimal increases and some reductions across weights and zones.

  • Weight 1-5 pounds increases 0%.
  • Weight 6-10 pounds increases 0.7%.
The rate impact on Parcel Select is minimal across most weights and zones, apart from an aberration for a Zone 5, 5-pound package.


Parcel carriers have been in lockstep with consistent increases of 4.9% for well over a decade. The market has become tolerant of that increase level, allowing carriers to effectively plan strategies based on that revenue uptick while generating new charges to generate revenue where new costs arise.

The carriers’ responses to the COVID-19 pandemic revealed they are able to implement peak surcharges and process changes quickly and counteract their own escalating costs and manage capacity. Setting precedents for volume-based peak factoring pricing, this additional cost structure creates cost management challenges unless you maintain ongoing visibility to your shipment characteristics and activity.

In the midst of pandemic and an e-commerce boom, the impact of those changes in 2020 has been more disruptive than ever. COVID-19 rolled into peak surcharges and now rate increases that can affect your business in different ways based on your shipping characteristics.

Do you have your finger on the pulse of your parcel program so you can understand the true cost impact of the 2021 annual General Rate Increase across your end-to-end supply chain?

Other questions to consider:

  • How do your contract terms and conditions address volume caps?
  • How will volume caps affect your actual rate increase, surcharges and other fees?
  • How does your customer base change now that more than 11 million people have been added to the DAS delivery charge?
  • How do you budget for these changes?

New cost scenarios arising again in the 2021 GRI require a lot of hard analytic across a large amount of data to extrapolate pricing changes into an advance plan.

It is essential to understand how your service needs and your shipments affect carrier costs, so you can negotiate your relationships based on the factors that will get you the best contract for years to come.

Transportation Insight’s team delivers expert small parcel supply chain strategy that can help maximize your transportation savings and logistical efficiency. With a team possessing deep experience among the carrier ranks, we are well equipped to provide transportation management solutions that leverage expertise in small package alongside expert guidance for LTL, and truckload transportation management and supply chain strategy.

Tap into our Parcel Experts’ ability to control your cost and improve your customer service. Schedule a consultation today for a deeper look at the parcel changes looming in 2021 – and how they will affect your specific organization.


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